Small businesses in the Philadelphia metropolitan area have ended 2024 facing severe financial challenges, reflecting a decline in their overall economic health compared to the previous year.
The latest findings from the Small Business Credit Survey, conducted by the Federal Reserve Bank of Philadelphia, shed light on the grim realities for 279 small businesses operating in the Philadelphia, Camden, and Wilmington region—a vital economic hub in the Northeast.
One of the most alarming revelations is that 63% of these firms now describe their financial condition as ‘poor’ or ‘fair,’ an increase from 57% in 2023.
This statistic highlights that nearly two-thirds of small businesses in this region do not feel financially secure.
Compounding their financial woes, only 28% reported having no outstanding debt at the end of 2024, a considerable decrease from 34% the year prior.
This drop suggests a growing reliance on credit as many businesses struggle to stay afloat.
The survey also identified three key pressures facing small businesses: sales, operating costs, and financing challenges.
A significant 65% of respondents cited difficulty in engaging new customers or boosting sales as their primary operational hurdle.
This struggle has been aggravated by rising expenses, with 74% of businesses noting significant increases in input costs, service fees, and wages.
In response to these financial strains, 28% of businesses sought financing at the end of 2024.
However, a shift was noted in the types of financing that small businesses pursued—applications for credit lines, Small Business Administration (SBA) loans, equipment loans, and merchant cash advances surged, while interest in traditional business loans and personal loans waned.
Facing this delicate financial landscape, many business owners are tapping into personal resources to cover their business expenses.
In fact, 54% utilized personal funds, and the same percentage reported raising prices for their products or services to cope with escalating costs.
Additionally, 48% of businesses drew from their cash reserves, indicating a desperate need for immediate financial relief.
Other emergency measures adopted include reducing staff hours, taking on additional debt, delaying payments, and seeking non-repayable grants and funds.
These efforts reflect the harsh reality where tough financial decisions have become commonplace for small business owners.
The report further provides insight into the demographic makeup of the surveyed businesses.
A majority, 61%, are in non-financial service sectors, while 39% pertain to goods, retail, and finance.
The majority of these firms are small, with over half (55%) employing between one and four people, and 56% reporting annual revenues of less than $500,000.
In terms of longevity, 33% of businesses have been operating for under five years, whereas 52% have been in business for more than a decade.
The ownership structure is predominantly white, with 79% of owners identifying as such, while 21% identified as people of color.
Gender-wise, 68% of these enterprises are male-owned, while female ownership stands at 22%.
This demographic information underscores the crucial role that small, often family-run businesses play in the local economy.
Despite the report refraining from making specific policy recommendations, it serves as a stark warning for local and state officials.
The precarious financial position of these businesses, coupled with their increasing reliance on credit and persistent operational difficulties, poses a risk to their long-term viability.
This has implications for job retention, income generation, and the overall economic health of the Philadelphia region.
As small businesses brace themselves for 2025, they do so with evident resilience against a backdrop of burdens that could overwhelm many.
The findings of this report paint a vivid picture of the current economic landscape for small businesses, suggesting that without support, the journey towards recovery may be fraught with challenges.
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